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A new survey by Booz & Company confirms that a “new frugality,” characterized by a strong preference for value has become the dominant mind-set among consumers and businesses in the United States.Born out of a prolonged recession that has left an unemployment rate north of 10% and an “under-employed” rate approaching twice that number, this trend is not likely to change no matter what the pace of economic recovery.

In short, the Great Recession has forced consumers – and businesses – to shift their behaviors, and there is surprisingly little difference in the expenditure reductions across demographic segments.So if business spending is destined to remain soft during a prolonged recovery, and consumer behavior has changed in perhaps permanent ways, waiting for a return to a pre-recession mind-set is not a productive strategy. Instead, we need to adapt to the new realities of frugal behavior and spending.

Over the years we have used this first newsletter of the year to reflect on subjects that have been on the top of our client’s list of things they want to solve.

Regardless of why and where we are engaged, it is clear that clients are looking to invest in projects that accomplish one thing – generate more revenue and gain market share. Everything else is just details that support those goals.

“How much should we budget for marketing and sales?” is a question we are often asked. The answer is, well…it depends.

Marketing Budget

First of all, it is important to establish a preliminary marketing budget based on the type and maturity of your business. If you’re a high-margin business, you can make a case that you want to continue to spend until you begin to see diminishing returns on your investment. Along that line, another important point to consider is the lifetime value of a customer. Establishing appropriate metrics is the first step in knowing when enough is enough.

As a rule of thumb, a new business trying to establish itself, needs to think 5 to 10% of projected gross sales (remember – gross sales will most likely not be that high a number compared to where you would like it to be in 3-5 years). Because of this, we recommend spending at the level of your projected sales – not last year’s actual.

On average, if you’ve been around awhile, we’d recommend lowering this figure to 3 to 5%. If you are an established business, operating for some time now without much marketing, count your blessings…and set aside perhaps 2 to 3% of projected gross sales. While it’s nearly impossible to give you a rule of thumb for marketing due to so many variables, allow me to make a few comments about what is ultimately needed.

Not surprisingly, the way a customer defines loyalty is often completely different from the company’s point of view. Customers define their own loyalty based on how long they have been buying a particular brand, or their preferences for one particular brand over another. In short, customers see loyalty as being any factor that makes them stick to a brand despite all the temptations to switch. This causes marketers a problem in that even low profit customers can consider themselves to be among a brand’s most loyal patrons, and they expect the brand to recognize them for having stayed faithful for so long.

So, unless marketers can recognize those customers who not only have been faithful to the brand for a long time, but are also actually profitable, the company may well be incenting the reduction of margins – or even losing money. They may be even more surprised by the sheer impact that these customers can have, given the age of instant communication. It takes only the click of a mouse to spread the word, and refermore marginal business your way.

Find out what is most important to the people who buy your product or service

You have heard this before in our newsletters. First is the need to make sure you really understand what is important to those who buy your product or service. Now this may sound obvious, but it determines what you need to say, and how you need to say it; so that prospects will hear what they need to hear in order to feel comfortable buying from you.

It is very easy to assemble a group of internal people around a table for a couple of hours and let the group talk itself into just about anything. Throw in a little office politics, and a race horse turns into the proverbial camel. But the only thing that really matters is what the people who write the checks think, your customers, so that makes it critical that we look at our business through the eyes of our customers and prospects.

Thriving beyond the current recession means knowing where you want your company to go when the recovery begins. In fact, throughout history those companies that used down markets to refocus and take advantage of opportunities that are always present have outperformed those who focus entirely on the short-term.

Start by understanding how your company and your products fit into a changed world. Understand the position of your company and products and the realities of the categories that they are competing in. Revisit your core strategies and positioning in the changing market, but don’t let the recession cause you to doubt or pull back on a major initiative you believe is still spot-on. Look at Apple. It opened its first retail stores in the recession of 2001. That same year it introduced the iPod, which transformed the music industry.

Hopefully the current economic downturn will begin to work itself out this year but, regardless, the strength of the relationships you build with your customers now will not only help you outlast the short-term challenges, but help position you for the better days to come.

Here are ten ways companies can win consumers’ hearts and minds during challenging times, most of which are based on the simple, common sense premise of providing great customer service:

1. Use cost savings to boost marketing

Focus on cost savings in addition to revenue generation when implementing a customer initiative, and then use those savings to fund a more aggressive effort to grow market share while others are cutting their efforts…and dropping off your prospects’ radar.

2. Don’t stop customer initiatives

Don’t discontinue all existing customer initiatives in an uncertain economy. If possible, look for ways to perhaps reduce the scope, or postpone certain less critical enhancements or improvements for the time being. Most important, keep the ball rolling on important initiatives in order to not lose momentum, or the equity you have already built toward capturing important relationships and markets.

We typically are approached by companies with a need in one of three areas – they want to take their business to the next level; they have an underperforming business unit or brand; or they want to take advantage of a new opportunity.

In all cases, our client either doesn’t have the necessary skill sets on their current team, or they simply don’t have someone available who has the time. Or sometimes it’s both.

Don’t let technology get in the way of your message. To avoid doing so, you need to take control of your internet strategy!

Why? To ensure that new technologies enhance customer experiences – not distract.

Key to that is making certain the focal point of executing strategy is the customer. Somewhere in the digital world that vision has become blurred, and while addressing the customer’s needs, wants, attitudes and motivations should be the primary objective, too many companies have become mesmerized by the siren of the latest technological wizardry, and the perceived need to match the competition’s online activity for fear of being left behind.